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So! Good news everyone! Apparently there is a fix for this issue, or at least potentially if your game falls into a specific category of how a game handles free DLC. According to @DarkStarSword (Steam Username), it's as follows:
I tried @DarkStarSword's idea, and at least for Pillars of Eternity II: Deadfire, it seems to be working. Thankfully PoEII seems to land in the first column of games, and not the second; I hope that others are as lucky.
And it just goes to show that this isn't a deliberate decision on Valve's part, as it doesn't show that I have the DLC. But the game inside does. I even tried quitting Steam and re-launching it, and it still worked.
For anyone wondering how to exactly do it. This is what I did:
1) Logged onto owner's account and downloaded all free DLC, and launched the game (just to make sure entitlements are applied).
2) Copied the whole game folder (e.g. Pillars of Eternity II)
3) Pasted the whole game folder away from Steam's directory (e.g. from "D:\Steam Games\steamapps\common" to "D:\")
4) Logged onto borrower's account (me)
5) Deleted game folder from "D:\Steam Games\steamapps\common" (replacing takes longer than just pasting)
6) Copied the game folder from 2 (D:\)
7) Pasted that game folder into "D:\Steam Games\steamapps\common"
Launched Pillars of Eternity II: Deadfire. Success!
So things seem to be working, as I had access to the Drunk stance, Critical Role portraits, and the game itself said they were installed (little icon in bottom left). Hopefully this is actually a way to "fix" what I consider a bug with Steam's Family Sharing. Unfortunately I assume that any future free DLC, will require this whole process again. But at least it's something.
Thanks again to @DarkStarSword for this find. Once the turn-based update fully releases for PoEII, I'll be able to play with all the free DLC available seemingly. Which is nice.
At least there's a partial light at the end of a tunnel that shouldn't have been dug (meaning Steam, not Pillars).
Hopefully this helps others who read this.

Further development on this issue:
I made a reddit thread talking about this a bit. If reddit is more your speed, and you didn't want to post on the Steam forums. I would appreciate any comments there as well.
Really any type of movement on this would be great, as I am not allowed to bump my Steam forum post, and conversation has sort of stopped for the time being seemingly. So if anyone that has experienced this issue (like @Azulmar ), or just wants it fixed. It would be fantastic if you could post in either of these locations.
And if it's not too much trouble, would anyone that does post on either of these locations, please post that they did so here? That way this gets naturally bumped as well. I didn't see anything against bumping in the rules here, but better to not bump artificially regardless if possible. The more activity on this, the more likely it gets picked up by someone with the capacity to do something about it.
Thanks again for your time!

Sorry to resurrect such an ancient thread haha. But I figured that I should continue here; since it has legacy, and still directly pertains to it. And also that way anyone that was watching this thread, can see any further developments.
I have continued this problem directly with Steam Support, and have started a Steam forum thread. The thread can be found here:
https://steamcommunity.com/discussions/forum/10/3658515990043882773/
I would greatly appreciate anybody that feels strongly about this issue, to go over there and post your desires for the removal of this "feature". Or even start your own threads. As the more voices and noise we can make about this, the better and quicker it can get changed. Or whatever way you feel comfortable asking Valve/Steam for this change (twitter, reddit, petition, etc.).
It would be great to have this restriction removed, as it would be a boon for anyone who can be affected by it. And literally imperceptible to anyone who wouldn't be.
Sorry again for the necro'ing of this thread, and thanks a lot for your time. Here's hoping that this can finally be resolved.

@Azulmar: Not as of yet unfortunately. I've been in contact with Aarik and David on this, and they with Valve (who insists it's been fixed). And am currently awaiting another reply from David (I'm sure they're busy) on this matter.
Thankfully they've been incredibly nice with this whole ordeal, and have gone way above in my opinion. On something that only really benefits them with the appreciation of a couple people who even realized it was happening. It's quite awesome of them.
Hopefully this does eventually get resolved. As I also would hate to miss out on those free DLC.

@David Benefield: Sorry for the late reply. I hadn't got notified there was a response to this forum for some reason until Azulmar posted. I will contact you via PM with my username, just in case you need further details that are a little more confidential we can continue it there.
@Azulmar: Thanks for posting man. Glad/sad that I'm not the only one. Hopefully we can both get this figured out.
EDIT: Nevermind haha, it wouldn't let me message you. Is it possible for you to initiate the chain, so I can then respond? If not, then let me know and I will post my details here. Just to clarify, do you need the account name (what I login to Steam with) or the Username (what everyone else sees?)
Thanks very much for your time David. And to Aarik whom I assume contacted you with this.

@Mannock: Steam should just remove this "feature", or at the very least, default to off. Or something. Annoying that I even have to try and reach out to Obsidian, or that they even have to deal with this.
Hopefully accessible free DLC is in my future haha.

@Mannock: By "little box next to the DLC name", are you meaning the DLC area on the game's page? As in, when you click Pillars of Eternity II: Deadfire in your library list, the DLC area right below achievements, and to the right? So for example, it might say:
ITEM INSTALL ACQUIRED
Pillars of Eternity II: Deadfire - Rum Runner's Pack Installed [check] Added 6/27/2018
That area? Because if so, that's what I'm saying. I have none of those free DLC's there, no matter if I clicked install, or add all items to cart, etc. No trick works, as it seems to be a licensing issue preventing it from even initializing. I'm thinking the reason it might not have started downloading when you exited the game was because of a Steam setting or issue you might be experiencing. As I saw other people talk about having issues similar on PoE2's DLC comments.
Thanks again man for trying to help. I think it has to be something that Obsidian takes care of, and nothing that I can do personally. I'm just hoping they know what to do. Feel bad though, as they already tried to fix the issue, and quite quickly. Sucks that I'm saying "umm, can you fix it again?".

@Mannock: Thanks man, but that's just the normal way the free DLC works for PoE2 unfortunately. What's happening for me, is that it will launch the game like it should, but it never grabs the DLC. It's not added to my downloadable content list, nor even started in my downloads list. It never starts. Whereas the person who owns it just has to launch the game by clicking install on the free DLC, and it will start upon exiting the game.
Also considering that Aarik D said he brought this to the team, and that they had fixed (or seemingly at least tried to) this. I'm inclined to believe there is actually a real free DLC related issue here. I appreciate you trying to help though. Just wish it was that easy, this game has some good free DLC, and I can't use it
@Skazz: Yeah from what I read before making this post, it definitely seemed to be. Why it's even allowed to be this way is beyond me. I get the argument for F2P games I guess, but that should be the exception rather than the rule. A developer shouldn't have to enable free DLC on family sharing, they should have to disable it. I don't know if Stellaris fixed this issue, but I know that TW:W did thankfully. So that means it's possible. Same with a couple other games that I read about. Can't remember the game now, but Steam themselves had to get involved to get it fixed with a client update. Maybe that's what is happening here? Not sure.
Hopefully it can get figured out more if others are still having issues as well. If it's fixed for them, than I'm lost haha.

Bumping just in case this has actually now worked for someone else, and it's a problem potentially on my end. Or if the team is aware of an issue, and there actually is a problem overall.
As it's still not working for me as of yet. Sorry.

Thanks very much Aarik D, and to the entire development team for getting on this, and quite quickly as well. Really appreciate it.
However, and I hate to keep this going, but are you positive this has been added? Or is it going to be added in a patch perhaps and I misunderstood? As I still seem unable to add them to my game. Whenever I click to download a free DLC, it launches the game (which it does for the person who owns it too), but it never adds the content. Whereas for the person who owns the game; the content downloads upon exiting.
If this has literally just been added, maybe it takes Steam a bit to rectify this? Or am I doing something wrong? I'll check again later today just to make sure, unless you respond back with further information.
Thanks a lot again for yours and the dev's time. I do sincerely appreciate it.
EDIT: Just checked again, and it still is not working for me unfortunately. Does it work for anyone else?

@Aarik D: No problem man, and thank you for forwarding it on. Will you be posting any relevant data here, or in patch notes? That way I'm (and others) are aware it was fixed? Or even not going to be fixed, whatever it may be.
Thanks again, I sincerely appreciate it.

Hello all,
So for those who might not know (like me before Pillars). Apparently Steam can suppress the sharing of free DLC on family-sharing. Which means that even if you say went half-in on a title with a friend, you cannot have access to any free content that game possesses unless you were the "purchaser" of said content. Paid DLC is asininely fine. This is also allegedly up to the developer's/publisher's (not sure which) discretion, which they can either deactivate or not.
However it seems like from my brief researching, that several studios were unaware of this and meant no ill-will by it. Because after all, why make it free if you're going to restrict it anyways? It leaves no recourse for the non-"purchaser" of the game, as I cannot add the free DLC, nor purchase it as with normal DLC. Instead I have to either refund the game (impossible in this case), or buy it again. Which would be quite absurd for free content. I think most developers (and even publishers) wouldn't choose to do this, as it's purely spiteful, and bizarre.
So I'm reaching out to Obsidian today in the hopes that they reverse this decision if they even made one. There have been several examples of studios getting this done quite quickly apparently, so it is indeed possible. Alternatively if you do not want to go through the whole process of contacting Steam for this, you can also just include the current and future free DLC's into the base game (as a patch); instead of an optional download.
Hopefully this all made sense, and some kind soul chooses to act on it.
Thank you very much for your time, and I look forward to the resolving of this unfortunate issue. Also sorry for the homework if this wasn't even a deliberate choice.
EDIT: Sorry for the delayed responses guys. New user, so I have to wait for moderator approval on my posts.